Airbnb is a 'cautionary tale' on how not to work with governments, says Uber's political adviser

Airbnb CEO Brian Chesky is facing a tough choice in two of its most prominent markets: New York and San Francisco. Thomson Reuters Airbnb called it an "unprecedented step" when it decided to sue its hometown after San Francisco passed stricter home-sharing regulations.

In New York, lawmakers voted to fine people who rent their apartment for less than 30 days, a move tech leaders slammed as limiting Airbnb's potential.

The clash in both cities is in part because of Airbnb's own efforts to shape the rules it's now complaining about. And startup political strategist Bradley Tusk doesn't know if Airbnb will be able to overcome the setbacks that Airbnb's political maneuvering has brought upon itself.

"I think it's a real problem. I don't even know how I'd tell them to fix it at this point," Tusk said at a dinner with reporters Wednesday in San Francisco. "I don't think it is fixable, at least in those two cities."

Tusk identified two areas where Airbnb would become a "cautionary tale" to companies in the future: It didn't take regulation seriously enough, and then it moved too slowly and let the opposition get oxygen and grow.

"I get wanting to be super aggressive. I started doing this with [Uber CEO] Travis five years ago, and there's no one more aggressive than Travis. But still, there are times when you have to recognize the political reality of what you're dealing with," Tusk said.

Instead of agreeing to work with New York years ago, Tusk says Chesky gave the hotel industry and affordable-housing advocates time to figure out what was going on and to become a powerful coalition against the startup. These aren't easily defeatable groups either, compared with other constituencies Tusk has worked to beat.

"If the boogieman is casinos, like we just did FanDuel, or the taxi medallion owners, they're kind of bad, sleazy guys. Affordable-housing advocates are kind of likable. They're just harder to beat," he said.

That leaves Airbnb with a tough choice, according to Tusk, although some of this may be sour grapes as a source close to Airbnb says it declined to work with Tusk. In his view, Airbnb can either operate in a legal gray area and risk lots of fines imposed on its hosts or on the company, or it has to right-size the market to only include legal listings, cutting into its profits.

"They're now in a situation, and it's just my view, that I don't see how they can overcome it. They've got a really tough choice," Tusk said. "They're raising now at a higher valuation. But if you were to say here's how much the San Francisco and New York markets are really worth in legal compliance and rerun the numbers, I don't know if it's a $30 billion company."